[Federal Register Volume 67, Number 39 (Wednesday, February 27, 2002)]
[Proposed Rules]
[Pages 8908-8910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4499]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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  Federal Register / Vol. 67, No. 39 / Wednesday, February 27, 2002 / 
Proposed Rules  

[[Page 8908]]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600 and 1650


Employee Elections To Contribute to the Thrift Savings Plan and 
Methods of Withdrawing Funds From the Thrift Savings Plan

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Proposed rule.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is proposing to amend the regulations on 
employee elections to contribute to the Thrift Savings Plan (TSP) to 
permit participants, beginning April 1, 2002, to transfer into their 
TSP accounts tax-deferred balances from an expanded group of eligible 
retirement plans. The Executive Director is also proposing to amend the 
regulations on loans and withdrawals from the TSP to specify that a 
participant who is seeking an exception to the spousal signature and 
notification requirements on the ground that the spouse's whereabouts 
are unknown must demonstrate that he or she made a good faith effort to 
locate the spouse in the 90 days preceding submission of the request to 
the TSP.

DATES: Comments must be received on or before March 29, 2002.

ADDRESSES: Comments may be sent to : Elizabeth S. Woodruff, General 
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, 
NW., Washington, DC 20005.

FOR FURTHER INFORMATION CONTACT: Salomon Gomez on (202) 942-1661; 
Thomas L. Gray on (202) 942-1662; or Patrick J. Forrest on (202) 942-
1659. FAX (202) 942-1676.

SUPPLEMENTARY INFORMATION: The Board administers the TSP, which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Public Law 99-335, 100 Stat. 514, which has been codified, as 
amended, largely at 5 U.S.C. 8351 and 8401-8479. The TSP is a tax-
deferred retirement savings plan for Federal employees, which is 
similar to cash or deferred arrangements established under section 
401(k) of the Internal Revenue Code. Sums in a TSP participant's 
account are held in trust for that participant.

Analysis of the Amendment to Part 1600

    On December 2, 1987, the Board published in the Federal Register 
(52 FR 45802) interim rules concerning the procedures governing 
employee contributions to the TSP. A final rule was published in the 
Federal Register (59 FR 55331) on November 4, 1994. On October 27, 
2000, Congress passed Public Law 106-361, which amended FERSA to permit 
the TSP to accept into the Plan any eligible rollover distribution, as 
that term is defined in section 402(c)(8) of the Internal Revenue Code 
(I.R.C.), that a qualified trust could accept. 5 U.S.C. 8432(j). 
Accordingly, on May 2, 2001 (66 FR 22088), the Board amended the final 
rule to permit participants to transfer into their TSP accounts funds 
from certain qualified retirement plans and conduit individual 
retirement accounts (IRAs). This proposed rule further amends the final 
rule.
    On May 26, 2001, Congress passed the Economic Growth and Tax Relief 
Reconciliation Act (EGTRRA) of 2001, which included a number of pension 
reform provisions. Among those was a provision expanding the definition 
of eligible retirement plan and thus expanding the types of plans into 
and from which an eligible rollover distribution can be made. Under 
EGTRRA, an eligible retirement plan includes: an individual retirement 
account described at I.R.C. Sec. 408(a); an individual retirement 
annuity described at I.R.C. Sec. 408(b); a plan qualified under I.R.C. 
Sec. 401(a), including a 401(k) plan, profit-sharing plan, defined 
benefit plan, stock bonus plan, and money purchase plan; an I.R.C. 
Sec. 403(a) annuity plan; an I.R.C. Sec. 403(b) tax-sheltered annuity; 
and an eligible I.R.C. Sec. 457(b) plan maintained by a governmental 
employer. (The first two plans are also known as ``traditional IRAs'; 
the others are known as ``eligible employer plans.'') The proposed 
amendment therefore provides that, beginning April 1, 2002, the TSP 
will accept an eligible rollover distribution from any eligible 
retirement plan.
    EGTRRA also permitted plans to accept after-tax contributions if 
their plan documents were amended to allow such contributions. The 
TSP's plan document, the Federal Employees' Retirement System Act, does 
not, however, allow the TSP to accept after-tax money; therefore, the 
requirement is unchanged that an eligible rollover distribution 
transferred or rolled over into the TSP must consist solely of tax-
deferred money. Also, uniformed services participants who are permitted 
to make tax-exempt contributions to their uniformed services TSP 
accounts cannot transfer those monies into their civilian TSP accounts.

Analysis of the Amendment to Part 1650

    Part 1650 was published in final form in the Federal Register on 
February 21, 1995 (60 FR 9595); the rule was substantially revised and 
published in final form again on September 18, 1997 (62 FR 49112). The 
final rule was subsequently amended on June 9, 1999 (64 FR 31052) and 
on August 20, 2001 (66 FR 43461). This proposed rule further amends the 
final rule.
    FERSA provides that the spouse of a FERS participant or uniformed 
services member must consent to a loan or in-service withdrawal and 
waive his or her entitlement to a joint and survivor annuity in the 
case of a different post-employment withdrawal election (signature 
requirement). 5 U.S.C. 8435(a)(1)(B), (b) and (e)(1)(A), and 8440e(c). 
In addition, the spouse of a CSRS participant is entitled to be given 
notice when the participant applies for a loan or withdrawal (notice 
requirement). 5 U.S.C. 8351(b)(5)(B). These requirements do not apply, 
however, if a participant can establish to the satisfaction of the 
Executive Director that the spouse's whereabouts cannot be determined. 
5 U.S.C. 8351(b)(5)(C), 8435(a)(2), (b) and (e)(1)(C).
    Section 1650.63(a)(3) provides that an exception to the spousal 
signature or notice requirement may be granted if a participant submits 
statements from himself or herself and from two other persons that 
explain the participant's inability to locate the spouse and describe 
the good faith efforts the participant has made to locate the spouse. 
Currently, the regulation does not prescribe a time period within

[[Page 8909]]

which these efforts must have been made; informally, the TSP has 
accepted efforts to locate the spouse that are as much as 12 months 
old; however, efforts to locate a spouse that are 12 months old may be 
stale. The requirement to make an effort to locate a spouse is not an 
onerous one, particularly when one considers the significance of the 
spouses' rights that may be affected. Thus, the Executive Director is 
proposing to amend the regulations to state clearly that the 
participant's efforts to locate the spouse must have been made within 
the 90 days preceding submission to the TSP of the request for an 
exception.
    In addition, section 1650.63(b) currently provides that an approved 
exception is valid for one year. Without a concurrent change to this 
provision, a participant's efforts to locate the spouse could still be 
more than 15 months old by the time a withdrawal or loan is approved. 
Accordingly, the Executive Director is also proposing to amend this 
section to provide that an approved exception will be valid for only 90 
days; conforming amendments are also proposed for Secs. 1650.60(b), 
1650.61(b) and (c)(1)(ii), 1650.62(b) and (c), and 1650.64(c), 
replacing references to a one year period with a reference to a 90-day 
period. This means that a participant applying to the TSP for a loan or 
withdrawal without his or her spouse's signature, or, if applicable, 
the spouse's address, must have made a good faith effort to locate the 
spouse within the last 6 months if there is no judicial, police, or 
governmental finding that the spouse's whereabouts cannot be 
determined.
    The TSP's loan regulations at 5 CFR 1655.18(e) incorporate the 
provisions of Sec. 1650.63. Therefore, the requirements for an 
exception to the spousal rights requirements will also change for 
participants applying for a loan.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities. They will 
affect only employees of the Federal Government.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act of 1980.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, and 1501-1571, the effects of this regulation on State, 
local, and tribal governments and the private sector have been 
assessed. This regulation will not compel the expenditure in any one 
year of $100 million or more by State, local, and tribal governments, 
in the aggregate, or by the private sector. Therefore, a statement 
under section 1532 is not required.

List of Subjects

5 CFR Part 1600

    Employment benefit plans, Government employees, Pensions, 
Retirement.

5 CFR Part 1650

    Alimony, Claims, Employment benefit plans, Government employees, 
Pensions, Retirement.

Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons set out in the preamble, chapter VI, Code of 
Federal Regulations, is proposed to be amended as set forth below:

PART 1600--EMPLOYEE ELECTIONS TO CONTRIBUTE TO THE THRIFT SAVINGS 
PLAN

    1. The authority citation for part 1600 is revised to read as 
follows:

    Authority: 5 U.S.C. 8351, 8432(b)(1)(A), 8432(j), 8474(b)(5) and 
(c)(1).

    2. Section 1600.1 is amended by adding in alphabetical order the 
following definition:


Sec. 1600.1  Definitions.

* * * * *
    Eligible retirement plan means an individual retirement account 
described in I.R.C. Sec. 408(a) (26 U.S.C. 408(a)); an individual 
retirement annuity described in I.R.C. Sec. 408(b) (26 U.S.C. 408(b)) 
(other than an endowment contract); a qualified trust; an annuity plan 
described in I.R.C. Sec. 403(a) (26 U.S.C. 403(a)); an eligible 
deferred compensation plan described in I.R.C. Sec. 457(b) (26 U.S.C. 
457(b)) which is maintained by an eligible employer described in I.R.C. 
Sec. 457(e)(1)(A) (26 U.S.C. 457(e)(1)(A)); and an annuity contract 
described in I.R.C. Sec. 403(b) (26 U.S.C. 403(b)).
* * * * *
    3. Section 1600.31 is revised to read as follows:


Sec. 1600.31  Accounts eligible for transfer.

    (a) Effective when the proposed rule becomes final, a participant 
who receives an eligible rollover distribution, within the meaning of 
I.R.C. Sec. 402(c)(4) (26 U.S.C. 402(c)(4)), from an eligible 
retirement plan may transfer that distribution into his or her existing 
TSP account. This option is not available to participants who have 
already made a full withdrawal of their account after separation from 
service or who are receiving monthly payments.
    (b) The only monies that the TSP will accept are monies that would 
otherwise be includible in gross income if the distribution were paid 
to the participant. The TSP will not accept any monies that have 
already been subjected to Federal income tax (after-tax monies) or 
monies that will not be subject to Federal income tax (tax-exempt 
monies).
    4. Section 1600.32 is revised to read as follows:


Sec. 1600.32  Methods for transferring eligible rollover distribution 
to TSP.

    (a) Trustee-to-trustee transfer. Participants may request that the 
administrator, trustee, or custodian of their eligible retirement plan 
transfer any or all of their account directly to the TSP by executing 
and submitting a Form TSP-60 or TSP-U-60, Request for a Transfer into 
the TSP, to the administrator, trustee, or custodian. The 
administrator, trustee, or custodian must complete the appropriate 
section of the form and forward the completed form and the distribution 
to the TSP record keeper.
    (b) Rollover by participant. Participants who have already received 
an eligible rollover distribution from an eligible retirement plan may 
roll over all or part of the distribution into the TSP in accordance 
with the following requirements:
    (1) The participant must complete Form TSP-60 or TSP-U-60, Request 
for a Transfer Into the TSP.
    (2) The administrator, trustee, or custodian of the eligible 
retirement plan must certify on the Form TSP-60 or TSP-U-60 the amount 
and date of the distribution.
    (3) The participant must submit the completed Form TSP-60 or TSP-U-
60, together with a certified check, cashier's check, cashier's draft, 
money order, or treasurer's check from a credit union, made out to the 
``Thrift Savings Plan,'' for the entire amount of the rollover. A 
participant may roll over the full amount of the distribution by making 
up, from his or her own funds, the amount that was withheld from the 
distribution for the payment of Federal taxes.
    (4) The transaction must be completed within 60 days of the 
participant's receipt of the distribution from his or her eligible 
retirement plan. The transaction is not complete until the TSP 
recordkeeper receives the Form

[[Page 8910]]

TSP-60 or TSP-U-60, executed by both the participant and administrator, 
trustee, or custodian, together with the guaranteed funds for the 
amount to be rolled over.
    (c) Participant's certification. When transferring an eligible 
rollover distribution to the TSP by either a trustee-to-trustee 
transfer or a rollover, the participant must certify that:
    (1) The distribution is not one of a series of substantially equal 
payments made for the life of the participant or for a period of 10 
years or more;
    (2) The distribution is not a minimum distribution required under 
I.R.C. Sec. 401(a)(9) (26 U.S.C. 401(a)(9));
    (3) The distribution is not a hardship distribution; and
    (4) If not transferred or rolled over, the distribution would be 
includible in gross income for the tax year in which the distribution 
is paid.

PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS 
PLAN

    5. The authority citation for part 1650 continues to read as 
follows:

    Authority: 5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), and 
8474(c)(1).


Secs. 1650.60, 1650.61 and 160.62  [Amended]

    6. Sections 1650.60(b), 1650.61(b) and (c)(1)(ii), and 1650.62(b) 
and (c) are amended by removing the words ``one year'' and adding in 
their place the words ``90 days''.
    7. Sections 1650.63(a)(3) and (b) are revised to read as follows:


Sec. 1650.63  Executive Director's exception to the spousal 
notification requirement.

    (a) * * *
    (3) Statements by the participant and two other persons that meet 
the following requirements:
    (i) The participant's statement must give the full name of the 
spouse, declare the participant's inability to locate the spouse, state 
the last time the spouse's location was known, explain why the spouse's 
location is not known currently, and describe the good faith efforts 
the participant has made to locate the spouse in the 90 days preceding 
submission to the TSP of the request for an exception. Examples of 
attempting to locate the spouse include, but are not limited to, 
checking with relatives and mutual friends or using telephone 
directories and directory assistance for the city of the spouse's last 
known address. Negative statements, such as, ``I have not seen nor 
heard from him'' or, ``I have not had contact with her'', are not 
sufficient.
    (ii) The statements from two other persons must support the 
participant's statement that the participant has made attempts within 
the preceding 90 days to locate the spouse and that the participant 
does not know the spouse's whereabouts.
    (iii) All statements must be signed and dated and must include the 
following certification:
    I understand that a false statement or willful misrepresentation is 
punishable under Federal law (18 U.S.C. 1001) by a fine or imprisonment 
or both.
    (b) A withdrawal election received within 90 days of an approved 
exception may be processed so long as the spouse named on the form is 
the spouse for whom the exception has been approved.


Sec. 1650.64  [Amended]

    8. Section 1650.64(c) is amended by removing the words ``one-year 
period'' and adding in their place the words ``90-day period''.
[FR Doc. 02-4499 Filed 2-26-02; 8:45 am]
BILLING CODE 6760-01-P